A corporate reorganization is any change to a company’s internal operating structure that aims to improve efficiency, increase revenues, decrease costs, or achieve any combination of these objectives. 

Under Section 368 of the Internal Revenue Code (IRC), there are seven different types of corporate reorganizations. The seven types of reorganizations are the following:

Type G Reorganizations under Section 368(a)(1)(F)

A Type G reorganization is available when a distressed corporation is going through a bankruptcy proceeding. The distressed corporation can transfer certain assets to a newly formed corporation in exchange for stock or securities. The stock or securities are then distributed to the debtor corporation’s creditors, security holders, and new investors (if any). 

With a Type G reorganization, the transfer of assets and stock distribution are generally tax-free events for both the participating corporations and the stockholders. 

Example Type G Reorganization for Place of Incorporation

Corporation A, a Delaware corporation, was formed on June 30, 2012. After a decade in business, the corporation is overwhelmed by substantial debts and must declare bankruptcy. 

On October 1, 2022, the corporation filed for Chapter 11 bankruptcy protection. The creditors agreed to a Type G reorganization plan for the corporation’s assets and debts. The creditors formed a new Delaware corporation, and Corporation A transferred certain assets to the new corporation in exchange for stock. Following the receipt of shares in the new company, Corporation A distributed the shares to the creditors.